Forex VS Stocks Market

Foreign currency exchange (Forex) market and stocks market work quite differently.

Neither Forex market or stock market is greater than each other but the investing concept in them differs quite a lot.
However, by comparing their differences, we wish to give you a clearer picture on these two markets thus help you to select the market type that suits you the best.
Fact is you might want to get involved in both market to diversify your on hand capital.
Average investment duration
Most investors in Forex market aim for a short-term deal. Individual Forex traders are normally trading Forex in a day-trade basis.
Forex day-traders normally take small daily profits (averaging 10~30 pips), entering and exiting the market in the same day.
Professional Forex traders normally will implement their own trading system in order to partially automate their day-trade process.
While day-traders do exist in stock market, majority of the stock traders are more interested in doing long-term trade nevertheless. Trades in stock exchange might last for months or years where traders will get the profit in one lump sum.
Market trend factors
Due to various limitations in stock markets (for example, restrictions on short selling), stock market trading depends a lot on the market trends.
There are few stock traders who manage to gain in down trend market.
On the other hand, Forex market offers equal earning potential regardless on the rise or fall of a country currency.
There is no structural bias to the market and there are no restrictions on short selling in FX market.
Trades in Forex are always done in pairs; rise or fall of a country currency will only affect its relative value compare to other currency and will not affect the chances of profit in the trades.
Leveraging your money
Forex brokers offer trade margin of 50, 100, 150, or even 200 to 1 of trade margin. Forex traders often find themselves controlling a huge sum of money with little cash outlay on the table. For example, a $1,000 in a 150:1 Forex account will gives you the purchase power of $150,000 in the currency market.
In contrasts, stockbrokers do not offer such kind of high leverage to their clients. The max you can get when trading in stocks might only be 2:1.
Trading on mini account in Forex
One of the advantages in Forex trading is that you can start small always.
With FOREX, you can invest in foreign currencies for as little as a $300 deposit with mini contracts. The smaller trade size enables you to take smaller risks and this is especially handful for beginners who wish to gain their trade experience in FX market.
However, this benefit is not available with stock trading. Most stock brokerages do not allow you to invest in odd lots, but only in blocks of 100 shares at a time.
With many stocks valued at between $20 and $500, which can mean an investment of $2,000 to $50,000 or more.
Fewer accounts to consider
There are thousands of stocks to choose from stocks exchange market but major traded currency in Forex is only seven.
You work less by analyzing fewer accounts in Forex trading.
Further more, countries are often more stable than companies and it's easier to predict their overall economic direction.
These characteristics of Forex market reduce the hassle of selecting and filtering potential accounts.
Decentralized market structure
Forex market and stocks exchange market structure differs a lot.
Stocks are traded in a centralized market.
Forex market is an over-the-counter market where there is no centralized market place for Forex trading.
Stock trading requires buyer and seller to ‘meet’ at a centralized market to do the exchange
(for example, NYSE).
Meaning that, all stock exchanges all trader’s orders are put through same dealer and pass through a single clearing firm.
Stock traders will u get same price on stock worldwide.
On the other hand, Forex trades can be done via different brokerage agents or dealers.
Each agents/ dealer has the ability and the authority to execute trades independently of each other.
This structure is inherently competitive as traders are faced with a choice between varieties of firms with an equal ability to execute their trades.
Currency dealers are in competition with each other, thus currency market price remain transparent and the spreads are kept tight all the time.
This will then give a better market for individual Forex traders to profit from.